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Why Amazon is Acquiring iRobot and What It Means For the Future of Smart Homes

Tien Tzuo
CEO, Zuora

Amazon’s sure been busy.  A couple of weeks ago, we wrote about Amazon’s acquisition of One Medical, possibly turning Primary care into “Prime-ary” care.  Hot on the heels of that, Amazon announced they are acquiring iRobot for $1.7 billion dollars. This week, we’ve spoken to a bunch of folks, and here’s the Subscribed Weekly take on this announcement.

For those readers who are new to the iRobot story, it’s a good one. To summarize, iRobot was started at MIT and after exploring more of than 20 different robot businesses, including bomb disposal robots, toy robots, industrial cleaning robots, and putting a robot on Mars, iRobot brought all that tech into the home, becoming a household name with its robot vacuums. We interviewed the founder and CEO Colin Angle last year after the company launched a subscription service. Everything about owning and operating a Roomba makes you realize how many technologies iRobot has mastered and turned into an affordable product with an easygoing customer experience. 

Meanwhile, over 100 million people know Amazon practically invented the voice assistant speaker category with the Echo and Alexa. Some even use the Fire TV. But Amazon has since made clear its ambitions in the smart home space by acquiring Ring, Eero, and Blink. Check out the Amazon Devices section on their website.

So what does Amazon want with iRobot, and what can other device makers learn from this acquisition?  Here are some thoughts. The punchline? If you want to be acquired, make a product that everyone sees value in, or at least define your industry. 

Focus and specialize

A few years back, after creating over 100 robots, iRobot decided to focus one doing one thing and one thing really, really well: cleaning homes. And that focus has paid off. To date, iRobot has sold over 30 million units, millions of which are connected into the cloud, and built a first-of-its-kind collective cloud intelligence operating system for its robot vacuums

Gone are the days of multi-function devices. For a device manufacturer to be successful today, focus is key.

Become indispensable to your customers’ lives

What’s the benefit to focusing and nailing a use case? Becoming an indispensable part of people’s lives. iRobot is not just a vacuum that you store in the closet, and take out when you need to clean up a spill. iRobot is really “cleaning-as-a-service”. By marrying a device with a service, iRobot’s implementation is closer to a magic fairy that cleans both when you are and aren’t at home. You don’t just own a robot, you own having a clean home at all times. I use it myself multiple times a week in my apartment and find it to be indispensable in my own life. 

And it’s no wonder that iRobot’s customers are fanatics. Owners give their Roombas names, post them on Instagram and Twitter, and build a sense of community with their robots. Remember Rosey from the Jetsons? We now live in an age where it’s possible to love and name your robot vacuum. Time flies when you’re building robots that people love. 

iRobot’s data positioning 

By becoming an indispensable part of people’s lives, device manufacturers wind up sitting on a gold mine: data. When you first unbox a Roomba, you’re given the opportunity to have it create a “smart map” of your home, to increase its efficiency on its first-use. After a few cleaning runs, your Roomba will be contemplating on a gold mine of floorplan data, as well as frequency of usage and what areas of the home need the most cleaning. Being that this is all sensitive information, it’s been refreshing to see iRobot care for data privacy with end-to-end encryption over the years

The iRobot stance on privacy also helps Amazon steer clear of any potential misgivings about having access to all that data. Think of it like this: if iRobot is the immune system of the new smart home, then right now Amazon is the brain, parsing and saving useful information for future use.

Launch a subscription

Introducing a subscription model is a big reason why iRobot has been able to appeal to a wider market, especially customers who might not otherwise be able to afford a $1000 robot vacuum. But for around $1/day, to always come home to a clean environment? And all the expendable cleaning supplies and even unit replacement (if something goes wrong) is included in that $1/day? That’s a good deal. This business transformation allowed iRobot to harness both its pedigree and customer support and change public perception.

Only Amazon would know, but having a successful foray into subscriptions makes iRobot that much more valuable to Amazon. In a sense, Amazon has Apple envy. 

Today, Apple gets over 30% of its revenues from services. Every Apple product sold is tethered to an Apple ID, and those Apple ID’s are busy buying iCloud, Apple Music, Apple News, Apple TV, Apple Games, and more. In fact, there are nearly 2 billion activated Apple devices, compared to only around 250 million Amazon Prime subscribers. And while Amazon has sold a lot of Echo devices, very few of those Echo owners are subscribing to services from Amazon.

Home automation could be Amazon’s attempt to build a subscription business as strong as Apple’s, and iRobot’s experience here could be a big asset.

Distribution and flexibility matters

There have been discussions to standardize the communication protocols that IoT devices share so that they can be fully cross-compatible across manufacturers. As an industry we’re not there yet and past efforts to do this successfully have fallen short. However, Amazon has a real chance at being to make a unified smart home using the internet-of-things part of a real-life scenario. Amazon will be able to not just sell you connected devices, but the entire smart home-as-a-service as an experience, instead of in bits and pieces. 

Amazon’s ability to push products at scale is impressive, especially on Prime Day, its annual sale. This year, it’s purported that Prime Day will take place twice in one year (once in the Summer and again in Fall) which would be fortuitous for Amazon, because it would be a big opportunity to push their newly acquired brand. When I reached out to Colin Angle to congratulate him on the  deal, he sounded very positive on the company’s future: “At iRobot, we love robots, and we have a vision of every home being powered by thoughtful intelligence. Upon completion of the acquisition, iRobot will be excited about the possibility of having Amazon’s support in helping us create this future faster.”

The Future of the Smart Home

Ultimately, by acquiring iRobot, Amazon has just made itself the de facto leader of smart home vacuuming robots. It has complex “smart map” data on your home’s floor plan to make better inferences on the smart home devices of the future. That data can then be used in a variety of ways, including improvements to the connections between devices. Gone is the generic do-it-all device. Amazon may benefit from cleaner workspaces, but the robotics experience of the same company that helped put a rover on Mars is extremely valuable. From iRobot’s point-of-view, being acquired allows it to go full steam ahead by expanding its hardware offerings, like introducing more ambitious projects, like a mopping robot that also vacuums, lowering the prices of their entire lineup, which has actually already happened at Amazon, or even a robot lawn mower

But we’re always looking to the future and what seems most likely right now is that Amazon is preparing a unified smart home portfolio, turning products into services, and thus making the smart home experience more affordable, attainable, and cross-compatible. 

Just imagine: you unlock the door coming home with your phone, with your trusted home security surveillance cameras enabled, while the floors were cleaned while you were at work, all of which is running on a WiFi network you can manage from anywhere. Suddenly, you hear your doorbell ring and see the notification on your phone: your new Amazon Prime package has arrived. You won’t need to go to different manufacturers to create this experience. Once science fiction, Amazon and iRobot will be making the accessible smart home a reality. They are in a great position to do this. We just have to wait and watch.

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